The Boy Genius And The World Computer
Understanding Ethereum from its co-founder Vitalik Buterin · 4 min read
Welcome to Super Simple — the best way to go down the Web3 rabbit hole
Short summaries of curated content. No external links. No biases. < 5 mins. Free
Hello
This post is a summary of the first appearance of Vitalik Buterin on the Lex Fridman Podcast, posted in March 2020.1
Vitalik is the co-founder of Ethereum, the second largest cryptocurrency in the world (market cap of ~$500 Billion in Dec 2021).
This 1 hour 35 minute episode helped me get a feel for the widely acknowledged genius of Vitalik. The summary will hopefully do the same for you or encourage you to watch the full episode.
To be clear, this is NOT a breakdown of Ethereum or its technology. The scope is confined to what is discussed in the podcast, which is a great first step to appreciating Ethereum without going down a technical rabbit hole.
Vitalik delves in to some of the core ideas behind Ethereum and the history of its creation. He also discusses many pillars of the cryptocurrency ecosystem such as Bitcoin, Satoshi Nakamoto and Proof of Work.
As always, plenty of the summary is plagiarized and paraphrased. Even quotes.
All credit goes to Vitalik Buterin and Lex Fridman. Links to all source content can be found at the end.
Read Time: 4 minutes
Time Saved: 1 Hour 31 Minutes
Prerequisites: Bitcoin, Satoshi (Need a refresher? Start with the basics here)
The Boy Genius and The World Computer
What is Money
Money is one of the closest things we have to a universal motivator. It is easy to set up and useful. It is essentially a game with this rule - you have ‘points’ and if you choose to give them to another person, their points increase by the same amount.
It has survived in society successfully as a meme (an idea that spreads) for thousands of years. The 20th century saw a lot of intermediation of money — banking, removing the gold standard, free floating currencies, payment processors, etc.
The Most Beautiful Ideas in Ethereum
1. Money can emerge out of a database….
….if enough people believe in it.
This is how blockchain databases lead to valuable cryptocurrencies.
Lex: Is it crazy that money now isn’t backed by anything physical?
Vitalik: In the 21st century, many things that have value aren’t backed by anything. Twitter’s employees could leave en masse and form Twitter 2.0. The value of Twitter comes from network effects and solving coordination problems.
2. Composability
Ethereum is composable. Composability means projects can build on top of each other without needing to communicate with each other. Like LEGO blocks.
For instance, an early blockchain game CryptoKitties2 allowed users to raise digital cats (think Tamagotchis from the 90s). Then HyperDragons3, an independent game, added a feature where their dragons could feed on CryptoKitties to gain special fighting powers, depending on the cat they ate.
On Satoshi Nakamoto, Bitcoin’s Pseudonymous Creator
He / She / They completely disappeared after seeding Bitcoin.
Satoshi released the original white paper for Bitcoin in October 20084 and was active in Bitcoin’s development till December 2010 before vanishing.
This disappearance and anonymity actually gives credence to Bitcoin as something neutral that doesn’t belong to anyone. It dissociates the project from the burden of say, the political thoughts of the leader or their old tweets.
Lex: So is there a similar burden on you?
Vitalik: Yes there is
This is one of the many reasons why Vitalik is always pushing for decentralization of Ethereum.
What Satoshi Really Invented — Cryptoeconomics
Its a common misconception that Satoshi solved the “Byzantine Generals Problem”.
The Byzantine General’s Problem is a thought experiment5 that boils down to this - How do you make sure that multiple entities, which are separated by distance, are in absolute full agreement before an action is taken? (The name comes from imagining 4 armies surrounding a medieval fort, needing to coordinate a concerted strategy to attack.)
The problem had actually been solved already. Satoshi developed a way to implement the solution in a digital network using cryptography + economic incentives.6
Adding in economic motivation ensured that a decentralized system would be able to come to consensus. And unknown participants would participate correctly.
This created Bitcoin.
And is also the basis for Ethereum, which acts as a distributed world computer.
World Computer? What Does That Even Mean?
The goal here in simple terms is to -
“Wire together a set of a large number of computers such that they pretend to the outside world to be a single computer. The single computer keeps working even if a large portion of the constituent computers that make it up break (or shut off)”
Founding Ethereum — Vitalik’s Journey
Vitalik joined the Bitcoin community in 2011, wrote for Bitcoin Weekly then co-founded Bitcoin Magazine. After a year in university, he hopped around to Bitcoin communities in different countries.
Met some notable teams including a project called Mastercoin7, which was building tools on the Bitcoin blockchain for use cases such as financial contracts, domain name registrations, etc.
Vitalik realized the Mastercoin protocol could be improved by generalizing it. Like replacing the specific tools on a swiss army knife with empty programmable slots.
He proposed a programming language to achieve this. They resisted because of the complexity.
He knew his idea was revolutionary so he decided to build it himself.
He released the white paper for Ethereum8 — a blockchain that allowed accounts to not only be users, but also “smart contracts” i.e. accounts controlled by code.
Vitalik didn’t expect the positive response he got from the Bitcoin community. In fact, he expected to go back to college after this. He actually received a Thiel Fellowship9 the next year to permanently drop out.
Ethereum 2.0 Is Coming
Two major upcoming changes in 2022 to Ethereum which will help it scale -
Proof-of-Stake: A new system for miners to participate in the blockchain that moves away from proof-of-work
Sharding: Every participant only downloads and verifies a small portion of transactions instead of every transaction
Let’s revisit Proof-of-Work before we talk Proof-of-Stake.
Proof-of-Work (POW)
A quick refresher:
Proof-of-Work is the original backbone of blockchain technology, particularly Bitcoin and Ethereum. Computers act as ‘miners‘, competing globally to solve cryptographic puzzles that demand computer resources (work). The winner gets to update the ledger and is rewarded with currency. This achieves consensus on the ledger.
The genesis of the concept simplifies it a bit. It was originally introduced in a paper “Pricing via Processing” in 199410. The use case was combating spam by demanding a little computer processing per email. This could make email cheap enough to send to a friend but prohibitively expensive to send to thousands of people.
Proof-of-Stake (POS)
Ethereum is switching to this mechanism. Note that many successful blockchains such as Cardano and Solana that launched after Ethereum are already based on POS.
Under the new mechanism, you can stake or lock up some cryptocurrency, lets say 100 coins. This stake becomes a ‘virtual miner’. The system assigns that virtual miner the right to create blocks. Someone with a stake of 200 coins gets assigned blocks twice as often.
This might sounds like the rich get richer. Vitalik acknowledges this is an issue but but proof-of-work is actually even more that kind of system.
Energy Consumption
Is there legitimately environmental impact from crypto mining? - “Yes”
Is one of the motivations of Proof-of-Stake to move away from this? - “Definitely”
Could Crypto Become The World Currency Someday?
It is very possible. It would need price stability. But Vitalik expects centralized or fiat currencies will likely continue to exist and be strong. And digitize in their own way.
However, cryptocurrencies will play an important role in making sure people have an alternative.
Are There Too Many Cryptos?
Diversity is good. But 40 high quality platforms shouldn’t be trying to do the same thing.
Let’s keep up the journey down the rabbit hole. Read the summary of a16z’s introductory episode to NFTs - All About NFTs, to understand the potential of an internet with property rights.
In case you missed it, read about Bitcoin from the perspective of its most high profile early evangelists - the Winklevoss twins. Through the summary of their interview with global macro investor, Raoul Paul.
Was This Helpful?
This quick check-in would be very valuable and will only take a few seconds.
Click on the appropriate option, then you can even see what other’s have voted
Did the summary make you more likely to watch the episode?
1. More Likely
2. Less Likely
4. Was Never Going To Watch The Whole Episode
5. Was Going To Watch The Whole Episode Anyway
Appendix
My Two Cents
//In the podcast, Vitalik covers some additional topics that he is passionate about, such as public goods and how to incentivize them. This has been left out of the summary for now as they are unrelated. Although some of the advanced concepts he discussed could end up being incorporated in to Ethereum as the cryptocurrency ecosystem matures. You can read these in the Scraps section.
Source
Interviewer - Lex Fridman, AI Researcher, host of the Lex Fridman Podcast Guest - Vitalik Buterin, founder of Ethereum
Additional Sources and Readings
Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption Vitalik's Blog: Quadratic Payments: A Primer Cryptoeconomics In 30 Minutes by Vitalik Buterin (Devcon5)
Scraps
Coming Soon - Public Good and Quadratic Payments
Footnotes
Link to episode. See Source above for additional information
The Thiel Fellowship gives $100,000 to young people who want to build new things instead of sitting in a classroom.
Pricing via Processing or Combatting Junk Mail, 1994, Cynthia Dwork & Moni Naor